The mechanism of oncogenic activation of the newly discovered erbB-2 growth factor receptor-like gene is being studied. A wide variety of human tumors contain an amplified and/or overexpressed erbB-2 gene. To study the role of overexpression of this gene in the initiation of oncogene transformation in a controlled in vitro model system, we engineered eukaryotic expression vectors to direct the synthesis of erbB-2 mRNA either under the control of a strong promoter (LTR) or of a weak promoter (SV40 early promoter). When erb-2 cDNA was expressed in NIH/3T3 cells under the control of the SV40 promoter, the gene lacked transforming activity, despite expression of detectable levels of the erbB-2 protein. A further five- to tenfold increase in its expression, under LTR influence, was associated with activation of erbB-2 as a potent oncogene. The high levels of the erbB-2 product associated with malignant transformation of NIH/3T3 were observed in human mammary tumor cells that overexpressed this gene. A murine pseudotype of the v-erbB gene has been employed to alter the growth properties and the differentiation program of an in vitro cell line of mouse keratinocytes (MKB). As already demonstrated for many other oncogenes, v-erbB is capable of relieving MKB cells from their dependence on EGF for growth. Nevertheless, the v-erbB oncogene is unable to block the expression of the differentiated phenotype when MKB cells are challenged with high calcium concentrations (a property displayed by all other oncogenes).